The European Commission has requested the opening of formal dispute
settlement in the World Trade Organisation (WTO) relating to the American
copyright system. The European Union is disputing Section 110(5) of the
1976 US Copyright Act that exempts from payment of remuneration
restaurants, bars or other places frequented by the public and that plays
music. This "homestyle exemption" was recently expanded under the "Fairness
in Music Licensing Act" , signed by President Clinton on 27 October 1998
and which enters into force on 26 January. Under the law, retail shops of
less than 2,000 qm and bars of under 3,750 qm will be eligible for the
exemption, which, according to the Commission's calculations, represent 70%
of bars and 87% of retail shops. The Commission services have calculated
that this law will lead to losses of USD 3.8 to 6.8 million a year in
direct earnings for Community right holders, i.e. 13-24% of the US
performing rights organisations' annual distributions to Community
collecting societies.

is the result of a procedure opened in June 1997 under the Community
regulation on trade obstacles, at the request of the Irish Music Rights
Organisation with full support of the Groupement europeen des societes
d'auteurs et compositeurs (GESAC). Informal consultations have been held
with the United States, but US authorities have not forwarded any proposals
for any solutions.

The EC decision states that the most direct effect of section 110 (5) is
that it deprives right holders of their remuneration for certain
communications to the public. It further states that it also entails
indirect losses to Community right holders because even those venues which
clearly do not qualify for the exemption are not always properly licensed.
In addition it states, that further indirect losses are caused by the fact
that the "homestyle exemption" has acted as a catalyst for negative
attitudes toward licensing of non-dramatic music in the USA. It adds, that
powerful lobbies of music users have successfully resisted efforts by the
collecting societies to effectively license and to collect reasonable fees
for the communication of the music to the public. (see para C (15) of
decision).

The European Commission awaited formal adoption of the new law before
lodging its complaint with the WTO. The parties have 60 days to engage in
formal consultations, after which the EU could move into the second phase
of dispute settlement procedure, requesting creation of a panel.